Commission launches ‘Innovation Deals’

At the end of May the European Commission launched a new pilot scheme called the Innovation Deals. The scheme aims to help innovators with promising solutions to environmental issues to navigate regulatory challenges to bring their ideas to market. The initiative was introduced in the margins of the Competitiveness Council meeting that took place on 26 May 2016 by Frans Timmermans, the Commission's First Vice-President, and Carlos Moedas, European Commissioner for Research, Science and Innovation.

On May 26 an open invitation was published by the Commission for expressions of interest from projects with strong potential to contribute to the EU's Circular Economy Action Plan. The selected projects will benefit from access to a close cooperation framework bringing together national, local and EU regulatory bodies to help navigate regulatory requirements. This pilot scheme is intended to support innovative ideas for maintaining the value of products, materials and resources in the (circular) economy.

What is an Innovation Deal?
Innovation Deals (IDs) will allow innovators to swiftly address legislative obstacles, shortening the time between their moment of inspiration and market uptake. Innovation Deals will take the form of a voluntary cooperation between the EU, innovators, and national, regional and local authorities. No funding for the preparation or implementation of IDs will be made available by the Commission.

The main aim of an Innovation Deal is to establish an in-depth understanding and clarification of how an EU rule or regulation applies. If a rule or regulation is confirmed as an obstacle to innovations that could bring wider societal benefits, the Deal will make the block visible and feed into possible further action.

The Innovation Deals platform will not jeopardise or compromise any environmental, social or competition principles, existing standards, or national legislation. The Deals aim to be an innovation in how the Commission works, helping to form a more modern and responsive administration in line with the Commission's Better Regulation Agenda.

Invitation to innovation
The call for Expressions of Interest (EOI) for the pilot phase of the ‘Innovation Deals for a Circular Economy’ opened on 26 May and will close on 15 September 2016. Up to five Expressions of Interest will be selected between October and December and will become Innovation Deals. Signature of the selected Innovation Deals is envisaged for the beginning of 2017 with an evaluation of the project being made in mid-2018.

In addition, up to ten Innovation Deals may originate through the Horizon 2020 Calls CIRC-01 (Systemic, eco-innovative approaches for the circular economy: large-scale demonstration projects) and CIRC-02 (Water in the context of the circular economy) that have been announced as part of the Work Programme 2016/2017 under the identifier ‘Industry 2020 in the Circular Economy’.

Applicants will be asked to outline their innovations and identify where they think EU regulatory frameworks are causing a block in getting their innovation to market.

The application to submit Expressions of Interest can be found here.

The chemical sector itself is also working with the Commission to identify regulatory barriers that are hindering the deployment of innovative technologies (both technologies developed by chemical companies or that could be implemented in the chemical sector). The scope of these regulatory issues includes those relevant to the Circular Economy and will to contribute to the sector’s discussions on Better Regulation with the European Commission in the future.

Bringing Science to Finance and Finance to Science

Key Enabling Technologies (KETs) are a cornerstone for innovation in Europe's economy and SusChem was heavily involved with the development of the European Commission’s policy in this area. KETs are important drivers of innovation, growth and industrial competitiveness in Europe. Approximately 10 000 smaller to medium-sized companies in Europe, including many developing sustainable chemistry solutions, base their businesses on the development and commercialisation of KETs. The European Investment Bank (EIB) has just published a study that reviews access-to-finance conditions met by companies investing in KETs and proposes nine recommendations to improve conditions.

The study highlights that, despite good market conditions in the financial markets, not all companies benefit from these conditions in the same way. Many dynamic innovators and research-driven newcomers find it hard to raise growth capital to develop and scale-up their businesses. Investment in innovation in Europe still lags far behind that of the US and Japan.

“We must bring “science to finance” and “finance to science”. It is my priority for the EIB Group to ensure that effective finance solutions and targeted advisory support are available for innovative companies to do just this,” says Werner Hoyer, President of the EIB in his foreword to the study.

What is the problem?
The key insight of the study is that many KETs companies struggle to obtain adequate debt financing. Due to its general risk aversion, the banking sector does not cater to the specific needs of many KETs companies with almost 30% of KETs companies in the study failing to obtain adequate debt financing. More KETs companies (about 50%) find themselves struggling to obtain the finance needed to generate further growth and innovation.

The study concludes that a high capacity for innovation and strong growth figures alone are not guarantees of adequate access-to-finance. Current conditions on Europe's financial markets are not to blame – the overall lending climate is described as favourable by market participants. But Europe's conservative financing “ecosystem” is not in favour of the most dynamic innovators. Most R&D-driven businesses find it hard to convince traditional/regional banks to provide the desired level of funding.

KETs companies can be clustered into three categories depending on their financial needs:

• Post start-ups: typically smaller KETs companies, which have outgrown the R&D phase and are generating profits but have a high business risk
• Quantum leap companies: KETs companies of various sizes, targeting a large scale-up requiring large amounts of debt in relation to their company size
• Well-established innovators: typically relatively larger KETs companies with a stable market position and a solid revenue base

KETs financing is a highly knowledge-driven business. In order to assess investment plans and business outlooks, enhanced technology, market and financial expertise are needed, but not always available to banks. By sharing and leveraging its existing knowledge base, the EIB could significantly improve access-to-finance conditions for KETs companies.

Big is beautiful – smaller KETs companies face more difficulties and require broader support beyond pure finance. The current banking system places smaller KETs companies at a disadvantage. These companies, which are often young and highly innovative, tend to fail in raising adequate finance due to the conservative, asset-based lending approach followed by the smaller banks/regional branches. Better preparation of both these financial intermediaries and smaller KETs companies, coupled with a higher-risk-taking approach to lending, is needed in order to help innovative KETs companies realise their full potential.

Public financing agencies could also play a stronger role in leveraging private money - in addition to "merely" providing funds. The public sector must take the lead initiative in order to significantly leverage the growth and employment potential of KETs companies providing access to higher risk capital and also advisory services and facilitating the meeting of demand for and supply of capital.

What can be done?
The study’s review of high-tech innovation financing worldwide yielded a number of approaches that the EIB could build on. The most promising innovative approaches for KETs financing found were higher-risk-taking debt instruments, specific equity-based programmes and the combination of financing instruments with advisory services. In addition the ability of financial instruments to attract private co-financing is a key element of successful public support to improve financing conditions for KETs companies.

The EIB is well-positioned in technology financing, with substantial funds available from EU-level programmes and financial instruments under the umbrellas of InnovFin and the European Fund for Strategic Investments (EFSI). The existing programmes, however, do not fully meet the specific needs of many KETs companies.

The study has developed nine recommendations on how the EIB and European Commission can help improve access-to-finance conditions for KETs companies. These are detailed below.

The EIB and European Commission should place particular emphasis on two areas:

• Improving “knowledge” in the market on both technology and finance to bring “science to finance” and “finance to science”
• Higher-risk-taking products and instruments designed to meet the specific needs of the identified KETs company types

In a highly fragmented European KETs landscape, the EIB has a unique ability to combine a deep understanding of the market with the necessary boldness to make a significant difference the study concludes.

You can download the full study here, which was carried out by InnovFin Advisory with the support of Roland Berger Strategy Consultants.

Investment Forum for Biotech Enterprise at BioSpain 2012

The SusChem supported European project BIOCHEM will be at BioSpain 2012 in Bilbao on 19 to 21 September to hold an industrial biotechnology investment forum. This is the first time BIOSPAIN has organised such a forum, which has the objective of presenting start-up projects or SMEs in an initial development phase, or having high potential, to an audience of international investors and financiers who are specialised in the bio-based market segment.

Participation in the investment forum at BioSpain 2012 is free and will allow entrepreneurs to present their projects to an international panel of expert investors and industrial representatives who will be able to asses and evaluate their ideas, increasing the chances of finding the right investor and partners. You only need to complete a short profile of your company to participate. The registration and profile form can be found here.

BIOCHEM uses the term “Accelerator Fora” for these events that are targeted at biotechnological SMEs, researchers and entrepreneurs. As part of Accelerator Fora activities a Business Plan Competition, technological transfer sessions and bilateral meetings with International representatives will also take place. for more information, please visit the BIOCHEM page on the BioSpain 2012 website.

Support to Entrepreneurs
BIOCHEM is a European Project that offers a unique promotion and financing opportunity to entrepreneurs and researchers who plan to start a business in the biological product sector. This is enabled via ‘Accelerator Fora’ events that bring together potential partners from industry, academia, venture capital and laboratory facilities throughout Europe.

BIOCHEM was launched in February 2010. It is a European initiative with the participation of 16 partners, two of which are Spanish: Feique and Madrid Network‐Biocluster. The project is co‐financed by the European Commission’s INNOVA programme to support companies who wish to access the growing biotechnological based chemicals product market. For more information visit the BIOCHEM website or to register with the BIOCHEM collaboration platform visit the dedicated site.